So is Bitcoin a store of value?

I’m thrilled and honored to be the first person to chime in on this topic.

Ok, that was a joke.  Clearly too much has been written on this topic. So much I hesitated to write this, except smarter people than me always advise to write about what you’re passionate about, and where you have an opinion, so here goes.

Spoiler alert here: Bitcoin is not a store of value.

Let me elaborate. Crypto currency in general is not a store of value.

For starters, stores of value do not fluctuate wildly in value on an almost daily basis, and certainly not month to month.

Investopedia defines a store of value thusly: A store of value is an asset that maintains its value without depreciating. Gold and other metals are good stores of value as their shelf lives are essentially perpetual, whereas a perishable good (e.g., milk) is a poor store of value due to its propensity to decay. Interest-bearing assets, such as U.S. Treasury bonds (T-bonds), are very good stores of value because they generate interest income and their principal balances are backed by legal contracts.

Clearly by this definition, current crypto currencies fail the test.  They do not hold value in a consistent, predictable fashion. Nor are they backed by legal contract, though there are some currencies on the horizon that may change this equation.

I also hesitate to call most crypto currencies ‘currency’, though I’ve written on this elsewhere. So let’s call that out of scope.

Crypto currencies are a curiosity.  A speculative role of the dice for the non risk averse, financially well heeled, and moon/lambo afficianados.

The time may come when we realize true price stability in some crypto currencies (another criteria for stores of value mind you). This could change things, though lacking a legal foundation, one wonders how much even this would change.

Liquidity is also a measure of stores of value. Have you ever tried to spend crypto currency? It’s firstly not easy, and secondly, can be costly. I wouldn’t call it highly illiquid, but it’s close.

I am convinced that the cryptocurrency bulls are a combination of over invested people hyping that which they are too exposed to, and wannabe crypto millionaires hopelessly deluding themselves into believing if they say it loud enough and long enough it will all come true.

Hope is fine, reality is better.

I have dollars in my wallet. I hope you do as well.

Chuck Fried is a blogger, crypto technology enthusiast, and can be followed here, or at chuckfried.com